Solicitor’s negligence – Damages – Measure of loss – Respondent firm acting for appellants on purchase of residential property – Respondent admitting negligence in failing to advise appellants of existence of planning restriction affecting the property – Restriction later removed on successful application to local planning authority – Whether damages for negligence to be assessed by reference to difference between value of property at time of purchase with and without restriction – Whether damages limited to cost of application to remove restriction – Appeal dismissed
The appellants retained the respondent firm of solicitors to act for them in relation to the purchase of a residential property in Suffolk for £600,000. The purchase was completed in May 2007. In 2008, it emerged that there was a planning condition affecting the property which restricted its residential use. In late 2009, the appellants applied successfully to the local planning authority for the removal of the planning restriction.
The respondent admitted that it had been negligent in failing to advise the appellants of the existence of the planning restriction. The central issue was as to the amount of damages payable to the appellants. The appellants sought to recover £100,000, representing the difference, as found by the judge, between the value of the property in May 2007 with the planning restriction and its value at that date without the restriction. The judge rejected that claim and awarded only £250, as the cost of the successful application to remove the restriction.
The appellants appealed. They contended that the case was one of capital loss, which should be measured by reference to the diminution of value attributable to the planning restriction, assessed at the time of acquisition. They argued that the subsequent successful application to remove the restriction was a collateral and independent act of the appellants pursued for their own benefit, which was extraneous to, and lacked a sufficient causal connection with, the respondent’s original breach of duty. The respondent argued that the appellant’s application should be taken into account as mitigation of their loss.
Held: The appeal was dismissed.
The core principle was that damages should be awarded in the sum that would put the injured party in the same position as if he had not sustained the wrong in question. By reason of the subsequent removal of the restriction, the appellants had suffered no loss, and there was nothing in respect of which they required to be compensated: Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 applied.
There was no requirement in all “capital loss” cases to assess the matter as at the date of purchase or treat the loss as “fixed” on that date. There was no immutable principle to be applied in relation to such cases; instead, the “normal measure” of damages in such cases was merely a starting point and should be applied only if it produced a fair result. The assessment of damages was to be undertaken realistically and not mechanistically. There was no reason why a consideration of subsequent events should necessarily be precluded. Consideration of issues such as mitigation and avoidance of loss would necessarily be geared to events occurring, or steps taken, after the date of breach and after the cause of action had accrued.
In the instant case, the respondent’s breach of duty lay in its failure to inform the appellants of the existence of the restriction, by reason of which negligent advice the appellants had proceeded with the purchase of the property. The appellants were under a duty to mitigate their loss by taking steps to seek to remove the restriction. The removal of the planning restriction by an application to the local planning authority was an illustration of ordinary principles of mitigation. It was not out of the ordinary course of things but, on the judge’s findings, was a simple, obvious and cheap procedure with a high likelihood of success on the facts. Moreover, even if the appellants had been under no duty to take that step, they had in fact done so and it fell to be taken into account accordingly: Philips v Ward [1956] 1 WLR 471 distinguished; Pankhania v Hackney London Borough Council [2004] EWHC 323 (Ch); [2004] 1 EGLR 135, Kennedy v KB van Emden & Co [1996] PNLR 409; [1997] 2 EGLR 137 and British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 applied. It was immaterial, on the facts of the case, that two years had elapsed before the restriction was removed.
The actions of the appellants in applying successfully to lift the restriction could not be regarded as a collateral transaction independent of the original breach. The original breach was not simply mere context for the application, but was the reason why it was considered necessary. In that regard, the appropriate test was better framed not as whether the original breach had “caused” the mitigating or avoiding act but as whether that act arose out of, or was sufficiently connected with, a breach to require to be brought into account in assessing damages: Famosa Shipping Co Ltd v Armada Bulk Carriers Ltd (The Fanis) [1994] 1 Lloyd’s Rep 633 and Fulton Shipping Inc of Panama v Globalia Business Travel SAU of Spain (The New Flamenco) [2015] EWCA Civ 1299 applied.
It followed that the measure of the appellants’ loss was the cost to them of removing the defect, which, in the event, was £250.
David Halpern QC and Teresa Rosen Peacocke (instructed by Keystone Law) appeared for the appellants; Ian Gatt QC and Graeme Robertson (instructed by Herbert Smith Freehills LLP) appeared for the respondent.
Sally Dobson, barrister
Click here to read a transcript of Bacciottini and another v Gotelee & Goldsmith (a firm)
